David Kelly, chief global market strategist at jpmorgan asset management, stated that Trump's aggressive tariff plan could slow down the global economy and bring upward pressure on inflation in the usa, highlighting the risks that have largely been overshadowed during the stock market rebound following the usa elections.

Kelly said: "The first smoke signal indicates that the tariff measures will be very aggressive, and there is almost no solution to stagflation; stagflation means rising inflation along with an economic downturn. Retaliatory measures will only make the whole world worse. The tariff issue will trigger a lot of conflicts. If you hit someone else's nose, they will retaliate. That is why they call it a trade war."

During the campaign, Trump stated that he could impose a 60% tariff on products from china and a 10% to 20% tariff on goods from other places. He dismissed concerns that tariffs would harm the usa economy, calling tariffs the "most beautiful word" in the dictionary and pointed out that the usa prospered in the 19th century when it imposed high tariffs and had no federal income tax.

It remains unclear what specific policy plans Trump will push, but his victory has prompted multinational companies to rethink global supply chains and discuss raising prices to offset costs. Meanwhile, investors are considering the implications of rising protectionism on financial markets and usa trade partners, including europe.

Trump's key advisor, Robert Lighthizer, who served as the usa trade representative in his first administration, recently advocated for protectionist policies in a commentary article in the Financial Times of the united kingdom.

Other strategists on wall street have issued similar warnings; in the bond market, bond yields surged as traders speculated that Trump's tax cuts and tariff plans would prevent the federal reserve from cutting interest rates. In the usa stock market, these concerns have largely given way to optimism that his policies will boost corporate profits.

Led by Oscar Munoz and Gennadiy Goldberg, TD Securities strategists expect that as central bank policymakers assess the impact of Trump's policies, the federal reserve will pause interest rate cuts in the first half of 2025. jpmorgan's interest rate strategists have also lowered their expectations for federal reserve rate cuts.

Kelly believes that a conflict between the Federal Reserve and the Trump administration is likely to occur, as Trump's policies may conflict with monetary policy, which still focuses on suppressing economic growth and controlling inflation. However, Federal Reserve Chairman Powell refrained from commenting last week on how Trump's policies would affect the future actions of the Federal Reserve.

Kelly added, "The Federal Reserve will not assume, speculate, or predict what tariff or fiscal policies will be. At some point, they will have to confront this issue, but I think they do not want to tackle it right now."

Editor/rice